DONALD ESMERIA, PETITIONER, VS. BONHEUR MARKETING CORPORATION, ERNESTO ONG, JOSE VICENTE PERALTA AND NATIONAL LABOR RELATIONS COMMISSION, RESPONDENTS.

Esmeria versus Bonheur Marketing Corporation

The Case

This is a labor case in which a dismissed van salesman, Donald Esmeria, challenged his termination by his employer, Bonheur Marketing Corporation, and the decision of the National Labor Relations Commission that upheld it. The action began as a complaint for illegal dismissal and monetary claims, and it reached the Supreme Court on a petition for certiorari. The case matters because it draws the two faces of due process in dismissal with unusual clarity: the employer won on substantive due process, because a just cause existed, but lost on procedural due process, because the notice it gave was defective. It is a standard examination vehicle for the salesman as a position of trust, for the requirements of the two notices, and for the measure of nominal damages.

Procedural History

Esmeria filed his complaint for illegal dismissal and monetary claims before the Labor Arbiter. The Labor Arbiter dismissed the complaint, finding that the shortages were proven by substantial evidence, that the dismissal was valid, and that the benefits due to Esmeria should be offset against his accountabilities. Esmeria appealed to the National Labor Relations Commission by memorandum of appeal. The Commission affirmed the finding of a just cause, holding that Esmeria held a position of trust and confidence which he breached, but it observed that the employer had failed to comply with procedural due process and awarded nominal damages equivalent to his one month salary. Esmeria then filed a petition for certiorari before the Supreme Court, seeking to nullify and reverse the Commission's decision and its resolution denying reconsideration. The Supreme Court partly granted the petition.

Facts

Bonheur Marketing Corporation distributes Winston tobacco products. On September 5, 2010, it hired Donald Esmeria as a van salesman to sell its products within a designated area, at a monthly salary of 11,000 pesos plus a commission of twenty-five centavos per ream of cigarettes. Esmeria procured merchandise from the company's office and warehouse, kept the stores in his area at reasonable inventory levels, and, whenever stores returned merchandise, was required to issue a Stock Withdrawal Slip and to turn the goods over at the warehouse, where they formed part of his accountability.

In the first week of June 2011, the field supervisor, Zaldy Barleta, raised with Esmeria the overdue account of TY Store amounting to 196,275 pesos. Barleta visited the store and learned that it had settled its account by returning 850 reams, or 17 cases, of assorted Winston cigarettes to Esmeria, but the returned reams were covered by no Return Merchandise Slip and were not deposited at the warehouse. A show-cause letter dated June 16, 2011 charged Esmeria with failure to return and account for the merchandise and to document the transaction under company policies. The letter gave him 24 hours to explain in writing.

On June 21, 2011, Esmeria turned over 539 reams worth 122,949.50 pesos, leaving 321 reams worth 73,325.50 pesos unreturned. On June 24, 2011, Bonheur terminated his services for dishonesty and serious violation of company policy. Esmeria claimed he had returned 871 reams covered by Return Merchandise Slips and received by his supervisors, and he admitted that he had planned to sell the pulled-out cigarettes to other customers. Bonheur later filed a case of estafa against him.

Issues

• Whether or not the National Labor Relations Commission gravely abused its discretion in dismissing the claim for thirteenth month pay and refund of the cash bond.
• Whether or not there was substantial evidence to justify the dismissal of Esmeria.
• Whether or not Esmeria is entitled to damages for violation of his right to due process in his dismissal.

Applicable Provisions

Article 282 of the Labor Code, as cited in the decision, lists the just causes for termination by the employer:

An employee may terminate an employment for any of the following causes: (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) Other causes analogous to the foregoing.

Subparagraph (c) is the ground on which the dismissal rests, and the Court construes it to require a position of trust and a willful breach founded on clearly established facts.

Article 277 of the Labor Code, as quoted in the decision, supplies the procedural side:

Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment.

This is the provision the employer failed to satisfy, because the notice it gave was vague and the period too short.

Section 2 of Rule XXIII, Book V of the Rules Implementing the Labor Code, quoted in the decision, states the standards of due process:

In all cases of termination of employment, the following standards of due process shall be substantially observed: For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side. (b) A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him. (c) A written notice of termination served on the employee, indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

The Court measures the show-cause letter against these requirements and finds it wanting.

Articles 1278 and 1279 of the Civil Code, quoted in the decision, govern the set-off of the amounts owed on both sides:

Compensation shall take place when two persons, in their own right, are creditors and debtors of each other.

In order that compensation may be proper, it is necessary: (1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor of the other; (2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same kind, and also of the same quality if the latter has been stated; (3) That the two debts be due; (4) That they be liquidated and demandable; (5) That over neither of them there be any retention or controversy, commenced by third persons and communicated in due time to the debtor.

These provisions allow the Court to set off Esmeria's accountability against the benefits and damages due to him.

Ruling

On the first issue, the Court held that Esmeria is entitled to 63,825.61 pesos, representing his pro-rated thirteenth month pay, sales incentive, ER reimbursement, and refund of his cash bond, as admitted by Bonheur itself. Because all the requisites of legal compensation are present, this amount, together with the nominal damages, is set off against the 73,325.50 pesos he owes the company.

On the second issue, the Court held that the dismissal was for a just cause. Salesmen occupy positions of trust and confidence, being entrusted with the employer's goods and exposed to voluminous financial transactions. Esmeria pulled out 850 reams from TY Store without issuing a Stock Withdrawal Slip, returned only part of them belatedly after the show-cause letter, failed to return 321 reams, and admitted he planned to sell the pulled-out cigarettes to other customers. Such a breach is willful because it is done intentionally, knowingly, and purposely, without justifiable excuse. The Court held that the employer's right to terminate under Article 282(c) was properly exercised, satisfying substantive due process.

On the third issue, the Court held that procedural due process was violated. The show-cause letter gave Esmeria only 24 hours to explain, did not enumerate the company rules violated, and did not specify the ground under Article 282. The Court stressed that the employee must be given a period of at least five calendar days from receipt of the notice, and that the notice must contain a detailed narration of the facts and specify the rules and grounds charged. An employer who dismisses for a valid cause but fails to observe due process is liable for nominal damages of 30,000 pesos, not one month's salary as the Commission had awarded.

Doctrine

A salesman occupies a position of trust and confidence, and his willful breach of that trust is a just cause for dismissal under Article 282(c) of the Labor Code. The breach is willful when done intentionally, knowingly, and purposely, without justifiable excuse, and it must be founded on clearly established facts.

Dismissal has two facets: substantive due process, the legality of the act of dismissal, and procedural due process, the legality of the manner of dismissal. The employer may satisfy the first and still violate the second.

Under Article 277 of the Labor Code and Section 2 of Rule XXIII, Book V, the employer must serve two notices: a first notice specifying the grounds and giving the employee a reasonable opportunity to explain, which means at least five calendar days from receipt, with a detailed narration of the facts and the rules and grounds charged; and a second notice of termination. A dismissal for a valid cause without due process makes the employer liable for nominal damages of 30,000 pesos.

Social justice does not require that every labor dispute be decided in favor of the worker, and it does not countenance wrongdoing by the underprivileged.

Disposition

The petition was partly granted: the dismissal was upheld as valid, but the award of nominal damages was increased to 30,000 pesos, and the amounts due on both sides were set off against each other.

Remember This

Memorize the pairing: a valid cause without the two proper notices means a valid dismissal but 30,000 pesos in nominal damages. Examiners use this case to test the salesman as a position of trust, the five-day rule and the contents of the first notice, and the set-off of the employee's accountability against his money claims.